Looking for an Advisor

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Jun 16, 2008 2:28 pm

I have been trying to add a Series 7 advisor to my extremely small shop. (2 people) I have placed ads in Monster but with no qualified applicants so far.  Here is my question. 

One: is it worth the risk in my position to hire a broker to work for me? 
Two: If so, where do I find a broker that wants to become independent and work for a small shop that is worth something (200K gross)? 
 
IndyEDJ
Jun 16, 2008 2:34 pm

How are you planning on compensating this person?  Base, base+commission, commission only?


 
Is he a W-2 or 1099?
 
Is he expected to work partially off of your existing book or solely find new business?
Jun 16, 2008 2:56 pm

They will be a commission only with a couple of months guaranteed income.   They will be W-2 and hopefully bring a book with them. They will own their book and I will put that in writting.

 
IndyEDJ
Jun 16, 2008 3:14 pm

A couple of things.  In your small 2 man shop, I'm assuming one of the two is you.  If so, is the other person a W-2?  Since you say this person will be a W-2, you may have already set up all of the payroll stuff and already dealt with taxes.  Sometimes the payroll taxes and stuff like that can be a nightmare.  Also, if they are W-2, would you be paying E&O insurance, licensing fees, reg fees, etc...that employer's generally pay?

 
I don't see why you would bring him on as a 1099 of your broker dealer and do have a joint number for his business that he brings in.  Since you're going to take a cut anyway, why not do this?  You can still allow him to own his book, but you are getting paid for his work without having to continue to pay him after he's up and running.
 
Also, in this case, you could do a draw after a certain period of guaranteed income to help him get off the ground.
 
A couple of months worth of guaranteed income isn't much to help a guy get started.  It takes at least several months of true prospecting before any small amount materializes.  If that's how you want to do it though, you will need to find someone with a little bit of experience.  But they can't be good enough that they deserve to be independent without your help.
 
You could find someone who is at a bank and sort of not making it.  He would be incenticized by your offer to get a higher payout, own whatever clients he could bring over, be somewhat independent, and not get fired at the bank.
 
The risk is that if he fails at a bank (or anywhere else), why would he succeed with you?  So you might have to give guaranteed income for a longer period of time than you initially think.  Also, if he's a W-2 under you, you technically are responsible, on top of taxes and other headaches.  If he's a 1099, the BD is responsible, while you get a split.
 
If you have enough to cover his expenses and you get along with the guy, it can't hurt too much.  Either he does fine and you make some extra money, or he doesn't and he's starving.  Just make sure to cover yourself legally and know that if you put in writing that he owns his book, anything that you do as joint, or referrals that result of the joint work (or his work), he is entitled to. 
 
I'll probably think of some more things, but it's a start...
Jun 17, 2008 9:17 am

I have had a couple of failed brokers that I gave a second chance to and working with them, there is a reason why they failed.  I don't want to go there again. 

 
IndyEDJ
 
Jun 17, 2008 9:32 am

Why not get the 7 yourself?

Jun 17, 2008 12:47 pm
IndyEDJ:

I have had a couple of failed brokers that I gave a second chance to and working with them, there is a reason why they failed.  I don't want to go there again. 

 
IndyEDJ
 
 
What is the payout grid for the guy you want to hire?
 
I just can't see why someone would want to be a W-2 of yours if he's capable enough to be a 1099 of his own.  He would have to have a tiny book, really want to be independent, and have enough in savings for when you've stopped paying him.  It's a small pool of people that will fit this, I believe.
Jun 17, 2008 3:33 pm
henryhill:

Why not get the 7 yourself?

 
Hey Rook:
 
I have a 7 , 24, 51, 65,63.  Any questions?
 
IndyEDJ
 
Jun 17, 2008 3:39 pm
 [/quote]
 
What is the payout grid for the guy you want to hire?
 
I just can't see why someone would want to be a W-2 of yours if he's capable enough to be a 1099 of his own.  He would have to have a tiny book, really want to be independent, and have enough in savings for when you've stopped paying him.  It's a small pool of people that will fit this, I believe.[/quote]
 
Grid would be 40% of total gross or 50% after clearing with me paying all expenses.  RayJay requires 100K but I was looking for 150-200k producer. Well below the 400-500 of the wirehouses.
 
IndyEDJ
Jun 17, 2008 3:46 pm

What does working for you bring to the table that working a large firm doesn't?  If the person is currently successful, why would the person leave their current firm to go to you and not go independent?


 
Those are my questions...toughguy.
Jun 17, 2008 4:05 pm
IndyEDJ:
 
 
What is the payout grid for the guy you want to hire?
 
I just can't see why someone would want to be a W-2 of yours if he's capable enough to be a 1099 of his own.  He would have to have a tiny book, really want to be independent, and have enough in savings for when you've stopped paying him.  It's a small pool of people that will fit this, I believe.[/quote]
 
Grid would be 40% of total gross or 50% after clearing with me paying all expenses.  RayJay requires 100K but I was looking for 150-200k producer. Well below the 400-500 of the wirehouses.
 
IndyEDJ[/quote]
 
IndyEDJ, this is just my opinion, and with all due respect:
 
You are looking for a guy that is somewhat successful at 150-200k in gross production.  He qualifies to be independent himself, but desires to be employed by you instead.  You are indy, so am I.  I know you probably have the mindset required for this...entrepreneurial (which is great!).  The problem is, the guy you are looking for obviously can't have this mindset, otherwise he'd be independent himself.
 
At the grid you will pay him, he will do better for himself net net at a place like a wire house.  With you, he will have to pay for insurance, as I'm sure you're not going to cover that.  Will you continue to pay his marketing costs on top of office expenses?  E&O insurance?  State registrations?  Licensing fees?
 
The only guy this will fit for is someone who purely wants an independent model without being independent himself.  Could you personally ever see yourself doing that?!?!  I can't.
 
Otherwise, he has to be somewhat of a failure, which you don't want to go down that route again.
 
Therefore, in order to find this guy for your situation, you will need to recruit a junior broker somewhere that has some sort of book already built.  There may be strings attached to this guy because he probably had a senior advisor helping him along.
 
You could recruit from a bank, wirehouse, or credit union for a somewhat successful guy.  Your only pitch would be that you offer him the independent model without being independent.  Same pay, same set up expense wise, except he is indy. 
 
In all sincerity, I just find it extremely doubtful to find a qualified candidate that would do this.  Let's not forget the risk of losing clients in a move.   
Jun 18, 2008 9:29 am

Here at Raymond James it takes $250,000 to have your own branch.  I was looking for someone who didn't qualify but wanted independence.  As for expenses, I was covering everything including E&O, marketing expenses, FICA etc.  It doesn't look promising but I will keep on looking.

 
IndyEDJ
Jun 18, 2008 12:24 pm

You just need to cold call the RRs in your area who either have been registered for 2-3 years (you can look up regristration & employment history FINRA site under Broker Check) and/or who are working at banks/credit unions.  Chances are you probably can buy a list from a list broker if you're in a larger area - or just pick up the yellow pages and start calling.  Have a letter ready with "more info" and try to get them to go out to lunch with you to discuss the advantages of independence. 

Jul 9, 2008 2:50 pm

No luck with the Monster Ad or job post on Company website.  The one I really wanted worked at a bank but was really afraid that clients wouldn't move and bank would come after him.  210 gross on 30M in assets. NatCity dumped the division once before, might do it again.  I might try again in six months or so. 

 
IndyEDJ